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It’s not widely known, but an earlier generation of libertarians condemned so-called right-to-work laws as anti-market. For example, Milton Friedman, in Capitalism and Freedom, compared right-to-work to anti-discrimination laws. Ayn Rand also opposed right-to-work laws. The Spring 1966 issue of the libertarian student-run journal New Individualist Review carried Prof. Hirschel Kasper’s article “What’s Wrong with Right-to-Work Laws.” NIR was edited by University of Chicago libertarians Ralph Raico, Joe Cobb, and Jim Powell. Among its editorial advisers were Friedman, F.A. Hayek, and Ben Rogge, a classical liberal long associated with the Foundation for Economic Education. (Of course that does not mean that any of those men necessarily agreed with Kasper, although with one exception that may not be an unreasonable inference, considering that NIR never published a pro–right-to-work article. The exception is Hayek, who wrote, curiously, in The Constitution of Liberty that “closed- and union-shop contracts … must be treated as contracts in restraint of trade and denied the protection of the law.”)

Percy L. Greaves Jr., a student and friend of Ludwig von Mises and a close associate of FEE founder Leonard E. Read, also made the libertarian and Austrian-economics case against right-to-work laws. His essay was published in a festschrift to Mises, On Freedom and Free Enterprise, which was assembled in 1956 to honor the 50th anniversary of Mises’s doctorate. One may draw one’s own conclusion about how Mises saw the issue, given Greaves’s choice of topic in that context.

In light of the controversy surrounding the passage of a right-to-work law in Michigan, Greaves’s lengthy argument is worth examining. For the record, no one was more fully devoted to laissez faire than Percy Greaves, a dedicated promoter of Mises’s work. (See his Mises Made Easier.) And he was no union sympathizer — or, to be precise, he had no sympathy for compulsory unions under the legal regime created by the National Labor Relations Act of 1935 (the Wagner Act).

But Greaves was consistent, and when he saw businesspeople asking states to pass right-to-work laws, which forbid employers from agreeing to make union membership a condition of employment, he objected. Let’s first be clear about what these laws do. The 1947 Taft-Hartley Act, which amended the Wagner Act, contains provision 14(b), stating that Taft-Hartley should not “be construed as authorizing the execution or application of agreements requiring membership in a labor organization as a condition of employment in any State or Territory in which such execution or application is prohibited by State or Territorial law.” (Emphasis added.)

Thus states may forbid a particular kind of contract between an employer and a union. (Under Wagner a majority of employees can authorize a union to represent them regardless of an employer’s wishes, and employees who do not want to join must still pay fees — not “dues” — to the union for representation services, since any conditions negotiated must by law apply to all employees, members and nonmembers alike, unless the union declares otherwise.)

Support for banning a voluntary agreement did not sit well with Greaves even if the ban was intended to counter an earlier government action. “The mass myopia of our age has been a reactionary reverence for government intervention,” he wrote in “Is Further Intervention a Cure for Prior Intervention?” “When anything goes wrong, from a train wreck to a change in stock market prices, the craven crowds always clamor for just one more law.”

He found “most astonishing” that businesspeople “seldom … ask for a repeal of the laws which are so often the root of their troubles. In accordance with the religion of the day, they ask for new legal restrictions which they think will protect them from the ills produced by the interventional laws already on the statute books.” (Here he invoked Mises’s “critique of interventionism”: Intervention creates problems that, unless the original intervention is repealed, beget further intervention, and so on.)

Greaves knew well that those “who advocate the so-called right-to-work laws [believe] these laws will remedy some of the sins of the federal labor laws that now grant special privileges to labor unions.” He had no sympathy for the Wagner Act, but he wasn’t buying the excuse: “Two wrongs never make a right. The economic answer is to repeal the bad intervention and not try to counterbalance it with another bad intervention. Such moves only provide the politicians with greater power over the entire economy.” In other words, the end doesn’t justify the means.

Greaves continued, “Those who advocate a legal ban on union shops seldom realize that they are sealing their own doom and placing their future fate in the hands of legislators who are only too eager to assume control of all economic activity.”

Personal involvement

Greaves was closely involved in the issue. At the request of Sen. Robert A. Taft in 1946, he helped draft a precursor to Taft-Hartley. According to Greaves, union activity had caused the Wagner Act to fall out of favor with the public. Taft wanted an ameliorative bill that would win enough votes to override a veto by Harry Truman — that is, a watered-down bill. Then, after the Republicans won the White House and Congress in 1948, they would pass a better law.

Greaves “opposed this thinking on the basis that it would be better not to have any new law at that time, [contending] that a successful veto of a better law would result in a growing public pressure for the repeal of the Wagner Act and the election of the party that espoused such a move. The senator was not willing to go that far.” Greaves feared that “if the senator’s plan were successful, the public would be persuaded that the then evident economic distress flowing from union activity had been remedied and the next tide of public opinion might well be in the other direction.”

Taft disagreed, and Greaves left the Senate committee. “Freedom … lost,” Greaves wrote looking back, because once Taft-Hartley passed, the pressure on the Wagner Act disappeared.

“Somewhat the same situation is involved in the so-called right-to-work laws,” he continued.

“If they are passed in a large number of states, they will temporarily relieve the present uneconomic evils that exist in federal labor laws. They will allay the fear among those people who see and comprehend the dire results now flowing from present union activities.… Actually, it might be both better economics and better expediency to let present laws go their limit, so that people might soon learn how bad they really are.”

Greaves’s prediction was accurate. Taft-Hartley passed, and talk about repealing Wagner ended. Over the years the National Labor Relations Board has managed labor relations unimpeded.

“The so-called right-to-work laws are … a proposed middle-of-the-road compromise with free-market principles for expedient purposes,” Greaves wrote. “They limit the right of free men to negotiate contracts for morally acceptable purposes and attempt to substitute the decisions of politicians for those that consumers would like to express in the market place.”

Greaves’s bottom line is that if Wagner is the root of the evil, one should work to repeal it rather than support new interventions. Short of that, in my view a better stopgap would have been to let states opt out of the Wagner regime. In other words, rather than prohibiting voluntary union-shop agreements between employers and unions, a state legislature could pass a bill simply declaring that the NLRB had no jurisdiction in that state.

Greaves could imagine sound reasons for an employer to wish to sign a union-shop agreement:

The fact that many current labor union practices are injurious to the general welfare does not mean that all actions of all labor unions must of necessity be considered evil or uneconomic. There are many truly economic functions that labor unions can perform. In a free and moral society, unions would be solely voluntary groups organized to help their members by helping them to increase their production and thereby their contributions to society. Their chief purpose would be to raise the standards of workmanship and production. They would then be a force for the general economic good of society as well as their members.

Here he echoed the views of Henry Hazlitt and Rand. Thus for Greaves,

If we can visualize such a situation, we will then be better able to understand why employers should be free to sign contracts to hire only such high type workers and why the so-called right-to-work laws would interfere with the main objective of social cooperation — the increased satisfactions of all the individual participants in the market.

Taming labor

To be sure, Greaves’s analysis has serious deficiencies, particularly regarding the pervasiveness of corporatism. In opposing legal privileges for unions, he stated that “most employers have been stripped of the privileges they had legally obtained during the latter part of the last century.” That clearly was not the case. Big business continues to have myriad explicit and implicit privileges that would be unattainable in a free market, as well as enjoying benefits of earlier privileges.

But to his great credit, Greaves noted that it was government intervention in behalf of capitalists that “produced the demand” for countervailing pro-labor privileges: “Most such intervention was planned to help organized ‘labor’ and the other large groups that had suffered when employers were in the saddle and obtaining favorable intervention for themselves.” (Emphasis added.)

This insight putting the horse before the cart sets Greaves apart from many libertarian analysts.

What Greaves and others overlooked (and continue to overlook), however, is that much of the business elite had long pushed for Wagner-style labor laws for the sake of industrial peace. The last thing they wanted was laissez faire for labor organizers. The New Deal, rather than being anti-business and pro-labor, actually tamed labor by bringing “responsible” union leaders to the conference table as junior partners. The Wagner-Taft-Hartley regime imposed restrictions on labor activity and required labor leaders to police their members’ compliance with union contracts. The final Wagner Act had elements that big business disliked, but it was the business elite nonetheless that laid the groundwork for federal management of labor relations.

Radical labor activists, such as those in the Industrial Workers of the World, the Wobblies, wanted no part of labor law because it imposed rules on what they could do to get a better deal from employers. Older tactics, such as wildcat strikes, secondary boycotts, and sympathy strikes along the supply chain, were outlawed in the new labor regime. Cooling-off periods, compulsory arbitration, and other constraints were imposed. It’s enough to make one wonder whether employers would really want Wagner repealed.

Greaves was right when he said that the target of free-market advocates should be all laws that interfere with free association — including Wagner, Taft-Hartley, and right-to-work. As Hirschel Kasper wrote, “The argument here is not one of whether union security provisions are good or bad; the argument is whether there should be legislation which prohibits them.” The nonaggression principle says No.

This article was originally published in the March 2013 edition of Future of Freedom.

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Sheldon Richman is former vice president and editor at The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State.
Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..."
Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics.
A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.

Reading List

Prepared by Richard M. Ebeling

Austrian economics is a distinctive approach to the discipline of economics that analyzes market forces without ever losing sight of the logic of individual human action. Two of the major Austrian economists in the 20th century have been Friedrich A. Hayek, who won the Nobel Prize in Economics, and Ludwig von Mises. Posted below is an Austrian Economics reading list prepared by Richard M. Ebeling, economics professor at Northwood University in Midland and former president of the Foundation for Economic Education and vice president of academic affairs at FFF.